Simon Carr: The Kitchen Capitalist

This time next year, we could all be millionaires
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The Independent Online

The lack of a business plan surprises some people. I have no plan. People look at me sideways when I reveal I have sold my house and am about to invest all my worldly wealth into a project that has no plan. But philosophy is my guide (I hope it's reliable). We have been told about the unknowability of the world and the limits of knowledge and I have chosen to believe it.

My enterprise is a new one and everything about it is unknowable. The most basic questions are scarcely worth asking. For instance: How many units do I expect to sell? It's not an unreasonable question. Not only do I have no idea, but there is no way of finding out.

It's a gift I'm making; a Christmas and birthday novelty for AB dads. How many units would the expert adviser say I'll move? Let's calculate. There are 3 million people in the target market. If you direct mailed them, a good order rate would be 2.5 per cent (or 75,000 units).

Blimey, you think, that's not very much. We want much better figures than that. How do we get better figures? Let's expand the target market. Let's include C1s and make it 12 million potential customers. Let's include parts of America and say the target market comprises 30 or 40 million consumers. Now we can get down to fractions of 1 per cent responses and still be millionaires.

You see what rubbish it is? We can dress this up in all sorts of qualitative and quantitive research, and pay £100,000 to a city firm of young men with no ties or razors, but you are still relying on the age-old deception: "And even if we sell a fraction of this, we'll be millionaires!"

Years ago I wrote a hit Christmas novelty book and it sold 40,000 copies in December. A business I started sold birthday issues of the Times. Pre-internet it sold 7,500 copies a year at £15 a pop. I am going to say this product will sell . . . more than 5,000 units a year and less than 25,000.

That's a lot of units. A lot of phone calls. A lot of stamps and wrapping paper and sellotape. At its lowest level, 100 packages a week taken down to the post office; 20 credit card slips a day filled out and filed. But at its upper level that will net, in profit, £30,000 a month. That will do the trick, if it can be kept going. Because there are variants to add into the range which might multiply that figure by five . . . A hundred and fifty thousand pounds a month. Profit.

That's the stuff. With £2 million in profit a year you might sell the business for £10 million. You could buy a Georgian manor house with gardens going down to the river for £2 million. A fifth of the total! So even the lowest possible level of success gives me two million quid! And even if I sold a fraction of that . . .